In its pre-Budget submission, the British Venture Capital Association (BVCA) has called for clarification of the financial promotion regime, specified in the new Financial Services and Markets Act, due to be passed by the end of this month. Issues have also been raised concerning a simplification of the capital gains tax regime and the wider use of share option schemes.
The BVCA has expressed concerns about the impact of the financial promotion regime on ordinary investment activity, particularly by unauthorised firms and is seeking a clarification of the exemptions drafted by the FSA. The main concern is that firms that have been advised that they do not need authorisation for their activities will find it impossible to operate because most of their communications will need approval by an authorised person.
BVCA chief executive John Mackie, said a clarification regarding routine correspondence is needed. He said: “At the moment, there is uncertainty with regards to the financial promotion regime and we need that clarified. The way the guide is presently framed suggests all documentation would be monitored, including every letter and draft of shareholder agreements. We can’t believe that was what was intended. If it is the case, transactions would become very difficult to manage.”
Mackie added that there is also a need for the capital gains tax regime to be simplified. The BVCA has for some time urged the Government to reduce the basic rate of capital gains tax for individuals and corporations. Following the acceptance of a tapering relief which will reduce capital gains tax over time to ten per cent on business assets, it is hoped the government will introduce a simple flat rate of ten per cent across investments held as business or non-business assets. This, according to the BVCA, would incentivise private investors to acquire shares in growing companies, with little impact on the Government’s net take.
Regarding the wider use of share options schemes, the BVCA sees share options as vital in aligning the interests of employees and shareholders to help stimulate the growth of enterprises in the UK. However, for approved share options schemes, the BVCA considers the £30,000 limit too low to attract and retain senior management and has proposed an increase of the limit on the market value of approved company share options from £30,000 to £100,000.
Further issues raised with regards to legislation affecting investment in unquoted companies include: increases in the upper profit and marginal relief limits for the small companies rate of corporation tax; amendments to the venture capital trust legislation to enhance its operation and scope; a clarification of anomalities relating to investments by venture capital partnerships: and a simplification of the rules for deduction of tax at source from payment of interest.